What in the world is an Interaction field?

by Erich Joachimsthaler and Anne Anne Olderog, July 20, 2022

In?The Interaction Field: The Revolutionary New Way to Create Shared Value for Businesses, Customers, and Society (2020) ?and our research since mid-2015, we traced the modern evolution of business enterprises, from a world dominated by big, traditional, asset-heavy, command-and-control “value chain” companies like GE and GM, through several phases, the first being dominated by early-Internet “platform” firms like Amazon and Google, the second being the social and mobile era which catapulted Apple forward, and created social networks such as Facebook. Today, these phases are often described as Web1 and Web2. The first two phases have been well described as the phases where platform companies grew — the emergence of the platform economy or the platform revolution.[1] In 2020, we contended that we are entering a third phase, the world of metaverse and Web3 technologies, a future where a new type of firm, namely “interaction field” companies will flourish.[2]

Web1 and Web2 had a profound impact on how companies create value and how they achieve competitive advantage. Until then, strategy evolved around deciding where to compete and how to compete in a market. Good strategy was about choosing a market and establishing barriers to entry such as building strong brands or establishing customer switching costs. Competition was essentially a way of competing in a World of Walls. Web1 and Web2 changed this world for companies and brands. Today, competition takes place in a World of Webs where everything connects: things, people, machines, companies and more — a world of hyperconnectivity. Industry or category boundaries have blurred, and barriers of entry have become porous. We believe that the metaverse will accelerate this world of connectivity, and Web3 technologies will put the World of Webs in overdrive and create the convergence of all sorts of worlds: the virtual world, the real world, or the mirror world, which is essentially the real world in digital form.

Interaction field companies will reach their prime in these worlds. A defining difference between “interaction field” and “value chain” and “platform” companies is that interaction field firms view consumers or users not as targets, audiences to capture, or a source of transactions to be aggregated, but they see consumers as a system and part of a complex network of relationships, from close-in family and friends to society at large. In this network or system, every consumer has his or her own set of goals that ladder up to values and beliefs. Consumers perform a set of activities to achieve these goals and priorities in the context of their daily lives. Value creation is about solving the challenges and problems of consumers as they seek to optimize the range of actions and activities they must perform to achieve their goals.[3] Interaction fields then optimize this entire system, ranging from consumers’ daily goals to broader and more important challenges of society.

A second difference is that interaction field companies open up their most important customer relationships to a wide range of stakeholders and third parties who provide new value in the field. This contrasts with value chain and platform companies who are hoarding and aggregating massive data pools in their internal systems such as their CRM or secured customer data platforms. For example, take a platform such as Uber, or an ecosystem such as Airbnb. Essentially these firms hoard transactions and data from riders and drivers, or from travelers and hosts, and they optimize their businesses to extract maximum value for themselves.

Interaction field companies instead create a nucleus of interactions with customers or consumers with maximum value, and then build an open architecture around it that attracts partners and third parties to create shared value for everyone. Marshall van Alstyne and Geoff Parker call this the inverted firm, where a firm seeks to externalize value creation to others by designing interactions and rules of governance accordingly.[4]

John Deere ?for example built a network of farmers who ride on Deeres, who share data from the health of a plant in the field to overall farm productivity. Instead of hoarding the data on its secure cloud servers, John Deere enriches the data and makes it available to fertilizer or crop suppliers, and a broad range of others that create value — solving major challenges that farmers and consumers face from making farms profitable, reducing water depletion, and ensuring healthy and sufficient food supply around the world. Interaction field companies maximize interactions in an entire field of value creation. Platform companies instead like to own the transactions, and own the customer.

A third no less important attribute of interaction field firms is that they motivate interactions far beyond their existing industries, such as agriculture or automotive. They encourage value creation through partnerships, platforms and ecosystems across different industries, sectors or categories. Ant Group’s nucleus is?Alipay ?for example, but it operates a number of platforms and ecosystems that have emerged and sit on the top of payments including lending, wealth management and even health insurance and many others. In a way, it makes the traditional concept of categories and industries irrelevant, since value creation is achieved across new market spaces that are defined around consumer or societal challenges.[5] This means automotive companies solve for mobility, not just selling a better car.

In short, interaction field companies change the nature of value creation for consumers, beyond mere fulfillment of needs and emphasizing relevant attributes through branding, or hurling new products and services at consumers in the name of innovation. In the interaction field, consumers innovate for themselves, they solve problems, collaborate with companies and create competitive advantage for them. They assume an active role in value creation. They change the way companies are configured beyond just the optimizing of their functions or their own activities along the value chain, and they change the way they create value beyond existing industry or traditional category boundaries.

Thank you for reading my post.

[1] “Platform Revolution: How Networked Markets Are Transforming the Economy―and How to Make Them Work for You,” Marshall W. Van Alstyne, Geoffrey G. Parker, and Sangeet Paul Choudary, March 28, 2016.

[2] The Interaction Field: The Revolutionary New Way to Create Shared Value for Businesses, Customers, and Society; Erich Joachimsthaler, Public Affairs, 2020

[3] I have first articulated this notion in my second book: “Hidden in Plain Sight: How to Find and Execute Your Company’s Next Big Growth Strategy,” Erich Joachimsthaler, 2007.

[4] Marshall W. Van Alstyne and Geoffrey G. Parker (2021), “Digital Transformation Changes How Companies Create Value,” Harvard Business Review, December 17.

[5] I like the concept of growth domains or market spaces where companies solve similar consumer challenges and problems (see Joachimsthaler 2007). This idea was pioneered by Rita McGrath who speaks of competitive arenas where groups of market players apply similar strategies.?“The End of Competitive Advantage,” ?Rita McGrath, Harvard Business Review, August 7, 2013.